What’s happening at Softchoice: The company closed its initial public offering Tuesday, raising $350 million in gross proceeds. Its shares had a soft debut last week, and closed at $20.01 Tuesday, down nearly seven per cent.
It marked a return to public markets for the Toronto-based information-technology company. It first went public on the Toronto Stock Exchange in 2002. In 2013, Birch Hill Equity Partners took it private once again.
“We’ve been on a growth journey, and the IPO, we feel, is a natural evolution,” said CEO Vince De Palma in an interview with The Logic. “And quite honestly, the IPO opens us up to more investment that will allow us to add to this growth going forward.”
In addition to the offering’s proceeds—much of which went to its majority shareholder, repaying debt and extinguishing other equity-based arrangements—De Palma said that “being a public company opens you up to different capital growth opportunities.” The company is focused on non-acquisition growth, he noted, including enhancing its capabilities in moving customers to the cloud.
Softchoice is among several tech firms filing to go public recently, including Q4, VerticalScope and, as of Tuesday, LMPG (formerly known as Lumenpulse).
Private vs. public: While Softchoice chose to return, other tech companies are starting to turn their backs on public markets. Dye & Durham, which held its IPO in July 2020, said Monday a company-management-led shareholder group wanted to take the firm private in a $3.4-billion deal.
Less than a year after its IPO, the company’s recent slew of acquisitions—it has spent about $800 million on M&A since going public—have made management believe it is in a position to self fund certain types of deals, wrote Stephanie Price, a CIBC analyst, in a note Monday.
Meanwhile, Saskatoon-based Vendasta shelved its $100-million IPO plans, instead opting to raise $119.5 million in a new financing round announced last week. The change of course came after it reportedly struggled to sell its offering and considered downsizing amid a choppy market for some tech firms.
De Palma said he couldn’t speculate on why some companies gravitate to private markets over a public raise, but Softchoice “felt this was a great time for us to go public.”
TSX thrives: Softchoice’s return came on a record day for the S&P/TSX Composite Index, which surpassed 20,000 points for the first time. It reached an intraday high of 20,022.13 points, up about 34 per cent from a 52-week low of 14,934.71 and about 78 per cent from its closing low of 11,228 points in March 2020 as the COVID-19 pandemic first started to spread.
Tech stocks helped drive the post-pandemic rally, but as vaccines roll out, investor interest has shifted to companies that could benefit from re-opening plans, such as resource stocks.
